MicroVision (NASDAQ:MVIS) is of of the few companies looking to cement its positioning in the fast-growing automotive lidar market. It is likely to break out with the successful commercialization of its automotive long-range lidar (LRL) sensors. However, the significant burdens from competitors, cost structure and pandemic-led headwinds make MVIS stock a hold.
MVIS stock had an incredible run-up in value earlier this year as part of a meme stock wave. It is currently priced around $9.50, well below its 52-week high of $28. This price drop is a much more appealing entry point than before.
Though its price may reflect its intrinsic value, MVIS stock is tough on its bull case at this stage. With multiple new entrants into this competitive industry, uncertainties surround the outlook of MicroVision — and the future of lidar. As a result, the company’s shares are a speculative play at best.
MicroVision’s Prospects Are Improving
MicroVision produces the best-performing automotive lidar sensors in the market. Its first-generation LRL sensor has an impressive range of more than 250 meters and can collect 10.8 million high-resolution points per second. Moreover, its compact nature facilitates the use of a camera module and lidar sensor in a single system.
This design advantage significantly reduces the sensors required per vehicle for autonomous driving. Additionally, its sensor technology is likely to be a hit with original equipment manufacturers (OEMs), who’ll be looking at appropriately-sized units that complement their designs.
The automotive lidar market is set to grow at an impressive pace in the next decade, with an expected CAGR of more than 30% through 2030. Regulatory bodies are likely to push autonomous driving adoption if it can result in better vehicle safety. The competitive advantage of the company’s LRL sensors puts it in a pole position to cash in on the favorable growth opportunities ahead.
Apart from product sales, MicroVision has recorded licensing and royalty revenues through its agreement with Microsoft (NASDAQ:MSFT). Its tech has been included in Microsoft’s Hololens, a mixed reality headset.
The Risks MVIS Stock Is Facing
Though MicroVision has a lot of potential to become a juggernaut in its sector, multiple risks limit its upside for now. First of all, the pandemic has created a massive supply shortage of raw materials for various industries.
For instance, the semiconductor chip shortage has been a thorn in the sides of several tech and automotive giants. On top of that, the development and testing of autonomous technology is likely to face delays.
Moreover, MicroVision is currently the front runner with its lidar technology. Still, multiple delays on the supply side have allowed several other companies to enter the fray. The goal is to focus on producing the lowest cost lidar system.
The company’s gross margins are likely to remain negative this year on the back of limited volumes. As production ramps up next year, gross margins are likely to improve significantly.
Moreover, research and development expenses are expected to remain on the higher side through 2025. On top of that, sales, marketing, general and administrative expenses will continue to rise at elevated levels over the next few years.
The Long Road Ahead of MVIS Stock
MicroVision has an incredible growth runway ahead with the rising adoption of autonomous driving technology. The global automotive lidar market is likely to grow at a spectacular pace in the coming years, creating a massive long-term opportunity for the company.
However, several risks limit MVIS stock’s attractiveness at this time. It has potential, but MicroVision needs to overcome its obstacles first.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.